Gas stored in Ukrainian reserves could help the rest of Europe meet demand this winter — a role reversal from recent years, when Ukraine turned to Europe to replace supply it no longer bought from Russia.
Source: Ukrtransgaz
Ukraine’s gas inventories are poised to start November at over 28bn m³, their highest in at least a decade and well above the 17.5bn m³ five-year average.
Of this, about 11.2bn m³ — equivalent to almost all the gas stored in France — has been banked under Ukraine’s ‘customs warehouse’ regime, a discounted storage programme that exempts users from import duties if the gas is re-exported in the next three years.
Another 12.3bn m³ of reserves are available to the Ukrainian market, which, combined with Ukraine’s own production, should cover the country’s needs over a normal winter.
The remainder is unavailable — a combination of operational gas, gas held in two mothballed facilities, and stocks at a site in the conflict zone in eastern Ukraine.
Winter buffer
After a string of mild winters, much of the northern hemisphere could be cold this year because of La Niña in the Pacific.
And there may be less LNG available than might have been expected at current market prices because of outages at several plants, which could intensify competition for marginal cargoes this winter.
Global gas prices have already risen as temperatures in the northern hemisphere fall and northeast Asian buyers tender for additional deliveries ahead of winter.
Source: Argus European Natural Gas
In past years, that combination of cold weather and competition for LNG has propelled European gas prices higher. But this year, European traders have warehoused some of the world’s summer gas glut in Ukrainian facilities, shoring up winter gas supply and contributing to the finances of Ukraine’s infrastructure operators.
Pulling gas from those inventories could reduce Europe’s need to compete with northeast Asian LNG buyers for supply this winter, even if the weather turns unseasonably cold. And because the stocks can be held for up to three years, if the weather is mild and LNG supply strong there is no requirement to flood the market in the spring by drawing down remaining stocks ahead of next year’s injection cycle.
Argus European Natural Gas includes detailed coverage of the Ukrainian gas markets daily. Learn more.
